Pakistan’s Information Technology (IT) exports witnessed a substantial increase, reaching an all-time high of $303 million in December.
This represents a significant growth of 17 percent compared to the previous month and a 23 percent rise on a year-on-year basis, as per the latest industry data released on Wednesday.
According to a report by brokerage firm Topline Securities, December’s IT exports exceeded the average monthly export figure of $222 million observed over the past 12 months, underlining the sector’s robust performance.
Two key factors were identified as driving this growth. Firstly, the State Bank of Pakistan (SBP) eased restrictions for IT exporters by increasing the permissible retention limit in the Exporters’ Specialized Foreign Currency Accounts from 35 percent to 50 percent.
This policy change allows IT firms to retain a larger portion of their earnings in foreign currency, facilitating their business operations.
Secondly, the Pakistani rupee’s relative stability against the U.S. dollar has encouraged IT companies to repatriate their overseas income, thereby enhancing the reported export figures.
It’s important to note that these figures reflect the amount remitted back to Pakistan rather than the actual value of services rendered abroad.
The government estimates that IT companies have around $1-2 billion in earnings held outside of Pakistan.
There’s potential for these funds to be repatriated if further incentives and facilities are provided to the sector.
For the first half of the fiscal year 2023-24, IT exports rose by 9 percent to $1.5 billion, up from $1.3 billion in the same period the previous year. Additionally, net IT exports, which are the IT exports minus IT imports, also saw an increase.
In December, net IT exports grew by 16 percent month-on-month and 13 percent year-on-year to $263 million, surpassing the 12-month average of $197 million. In the first half of FY 2023-24, net IT exports recorded a 7 percent year-on-year growth, reaching $1.3 billion.
In a move to bolster the local IT industry, the government has initiated the Pakistan Startup Fund, committing Rs2 billion annually as equity-free capital for startups. This initiative aims to foster industry growth, create jobs, and provide more opportunities for the youth.
Topline Securities acknowledges the government’s efforts to stimulate the industry but notes that it will take time for substantial changes to materialize.
The brokerage also points out that reaching the government’s ambitious $5 billion target for gross IT exports seems challenging.
They project that the gross IT exports for FY24 will likely be between $3-4 billion, compared to the $2.6 billion recorded last year.
